7 Key Impacts of Brexit on the Retail Sector

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On Friday, 24th June 2016 the U.K. had voted for Britain to exit the European Union and in many ways this was met with great disbelief. The impact of this decision created uncertainty amongst everyone within and outside of the U.K. Since the vote, there has been many plans about where this will lead us and what the government should do.

One of the main areas that will be affected by Brexit is the Retail industry. It not only depends on consumers from within the country but also many more from outside. So, how has it affected this sector?

Below is a list of 7 key impacts that all retail companies will be facing in the near future.

  1. Fragile Consumer Confidence

    After the vote, political uncertainty resulted in the dampening of consumer confidence. Consumer confidence is considered the 1“driver of the retail sector’s fortunes” and that the “psychology of the consumer is critical”. Without the consumer, there is no business. It’s as simple as that.

  1. Business Plans

    This sense of uncertainty also leads to the fact that companies are unable to make concrete business plans for the future. They are reliant on the government to sort issues before they can take any sort of action.

  1. Import Costs

    A lot of retailers tend to buy most of their goods overseas, paying in dollars and thus resulting in a higher risk. These retailers will be severely impacted by increased import costs due to the devaluation of the pound.

  1. Exchange Rates

    Due to the costs of goods purchased overseas rising, this means that there will be less favourable exchange rates. This then creates the decision whereby retailers must either increase their prices to consumers to create a more competitive environment or absorb the loss into margins. This is increasingly difficult for those smaller retailers.

  1. Labour Supply

    Due to the restraining of migration, the retail sector would be short on supply of labour. Even though the retail sector does not depend upon cheap labour, it does however look for specialists in the European market. These restrictions would result in a limited supply of the talent pool.

  1. Positive Opportunities

    There are a few positives to come out of this; most of which come from consumers. One of these is that consumers will always continue to shop, there is a need for it. The exit of the European Union may encourage consumers of the importance of provenance. Furthermore, there will be an increase in demand of online international customers who seek and take advantage of the weak pound.

The UK exit was “…slow to emerge and probably less dramatic than we have been led to believe in the heat of the Project Fear..” (Martin Hayward)

1 Martin Hayward – Hayward Strategy and Futures

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